A Year of Recovery Leads to Long-Term Sustainable Growth
The last year has been a pivotal one in the Sarasota, state-wide and national real estate market. It has been hard to miss the bold headlines and seemingly never-ending reporting from virtually every news outlet of the many important milestones that were reached this last year. And the good news is that virtually every real estate expert and economic analyst informs us that the steady growth we experienced this year is not expected to wane.
In fact, it has been said that our country’s economic recovery is somewhat centered on the continued revival of real estate. Some are estimating that as much as 20% of the overall growth expected in the US economy in 2013 will come from the housing market, demonstrating the prominence that real estate plays in the health of our nation as a whole.
One of the most remarkable statistics of the last year on the national scene is the inventory of existing homes being reduced to one-half of what it was in 2006, and even though housing starts increased more than 30% from the previous year, buyer confidence is clearly outpacing the new home completion rate. Existing home inventory is at only 4.4 months of supply, its lowest point since 2005.
Another notable fact is that the U.S. median sale price rose 11.5% last year. Sarasota’s median price exceeded that with a 13% rise, which will translate into a sense of urgency to make offers from a buyer perspective and adding yet another incentive for reluctant sellers that have been waiting for the right time to enter the marketplace. Given all of these factors, now is an ideal time for sellers who have been sitting on the sideline and buyers that were waiting for the “bottom” of the market to jump in.
The Sarasota Association of Realtors reported this week that our area ended the year with sales a full 20% better than last year, the highest since 2004. In December alone, sales grew 28% over the previous year. Michael Saunders & Company also reported exceptional news – more than $2 billion in sales last year, our best results since 2005 and the highest number of transactions in the company’s 30+ year history!
The following are some of the data points that I believe are critical to keep an eye on, and the statistics are from a variety of resources that I monitor (including TrendGraphix, the latest report is attached HERE):
The Sarasota area is on a modest growth path and at an ever increasing accelerating pace, however I do not expect the market to hit the hysteria levels of years past, rather I believe our industry will be more firmly rooted in reality. Evidence of mounting interest from buyers outside of our area is seen in a number of reports and surveys. One such report was released last week in which Penske, the moving company, claimed that Sarasota was in the top-10 moving destinations last year. As consumer confidence across the nation builds, Sarasota will most definitely benefit from aging boomers and young entrepreneurs looking to relocate.
- Closed transactions in Sarasota during December were a robust 27% higher than December 2011.
- Sarasota’s closed transactions for 2012 are 11% higher than last year; that is approximately 1,000 more closed transactions compared to 2011, and over 1,700 more closed transactions compared to 2010.
- Closed transactions in 2012 were the fourth highest in the 90-year history of the Sarasota Association of Realtors, achieving 9,541 total sales. In 2003, sales in our market hit 9,697, followed by 11,267 in 2004 (the current all-time high) and 9,284 in 2005. The annual sales bottomed out at 5,589 in 2008 before beginning the steady climb to the current level.
- The median sale prices for all residential properties rose for the full year to $175,000 in 2012, another indicator of the ongoing real estate market recovery in Sarasota. In 2011, the full year median prices were at $155,925 for single family homes and $156,600 for condos, or roughly 13 percent lower.
- Single-family median sale price for all Sarasota transactions last month was $189,500 compared to $160,000 a year ago, an 18% increase over last year.
- Sarasota condo median sales price was $182,500 versus $150,000 a year ago, or 21.6% higher than last year.
Pending home sales are a leading indicator of the activity expected to come in the next month or two. It also helps us to determine market stability and what coming trends may be. Again, properties under contract but not yet closed grew at a healthy pace, leading me to be confident in saying that our peak selling season ahead will prove to be impressive.
Despite reports of many builders restarting stalled developments, strong growth in building permits being issued, and builders announcing record activity from buyers, little progress is being made in adding adequate inventory of new homes in the region, since the demand is far outpacing the speed of new home completions. It is my hope that with the rising prices already being seen that more existing homes will enter the market and help to ease the dearth of properties to sell.
A market is considered balanced between sellers and buyers when total inventory hovers around six months of supply, though in the higher priced categories, a stable inventory is considered 12-18 months. The following data shows that we are well below the targeted balanced market, but I remain confident that with the listing interest I have seen from sellers considering putting their homes on the market, and the large number of new building permits being issued, 2013 will bring a more equalized inventory environment.
- Available listings in Sarasota have decreased 35% since the beginning of 2012 or 1,475 properties. This is a 10 year low.
- Based on sales in December, our region is sitting at approximately just three months of supply. The present listed inventory in our area has not been this low since 1998.
- There are now just 2.3 months of inventory for properties listed under $500,000.
- In the segment between $500,000 and $1,000,000, there is a 6 ½ month supply.
- At the luxury level over $1,000,000, the available inventory is a 14 month supply, the lowest since 2002, before the boom market. It is also 65% below 2007 when local inventory peaked.
- Four years ago the inventory was over 9,500 units, and properties for sale today sits at just 2,842.
- National inventory is sitting at 4.4 months of supply, the lowest level of inventory since May 2005.
- New home starts in the Sarasota area are reportedly 30% ahead of last year.
- New home permits issued in Sarasota increased more than 94% in December compared to last year.
- U.S. single family home building has grown 74% since the low in mid-2009, and are also up about 30% from last year.
It is of no surprise to those of us here that Sarasota has been cited as the epicenter of bank-owned homes, foreclosures and short sales over the last few years. However, despite Florida still being called the top market for distressed homes, Sarasota has successfully moved ahead as other parts of the state continue to struggle. Before the market collapse, fewer than 1% of the homes in our market were considered distressed. At the height that number skyrocketed to more than 50% of our available inventory in late 2010. As this trend continues, there will be less impact from the REO’s on pricing allowing the increases we have been seeing in median sale prices to maintain their upward climb.
- Currently, only 475 properties for sale in the MLS are listed as short sales or bank owned (REO’s), equal to about 13% of available properties, a nearly 25% decrease since the beginning of the year.
- This reduction is on top of a 4.5% improvement from 2010-2011 and 7% in 2011-2012.
I believe that the dust has settled and a clearer picture of our new housing landscape is being defined. Because of the inventory drain (25% lower than at the end of 2011), growth in consumer confidence and buyer hunger, the significant draw-down of distressed properties that had been putting downward pressure on pricing (fallen from 51% of the market to 32%,) and the increase in 2012 of 13% in median sale price, it would seem that the occasional tales of competition for quality properties that we have seen this year will become more of the norm in 2013.
Our peak selling season is underway and traffic through our remaining best properties on the market from qualified buyers is much greater than in the last few years. Our Sarasota real estate market is poised for an exciting year of sustained growth and I look forward to sharing our progress with you in my future reports.
Michael Saunders reveals her thoughts on the new housing picture in her blog this week. Read her take on it HERE.
The following statistical data is provided through the Multiple Listing Service (MLS) of the Sarasota Association of Realtors by agents within our local board. The table summarizes what happened in each price segment. The Sold (Closed), Pending Sale and Listed columns are sales and new listings for the month of the report, and the Pending Total and Listed Total are the current totals of each. The second table shows an 8 year history of sales.